How not to get trapped in the debt cycle

When you’re living paycheque to paycheque and carrying a debt load, you may feel like you’re spinning your wheels, financially speaking.

“A debt cycle is when you’re continually borrowing money, in many cases to pay other debt payments. The cycle churns, while your debt grows and your interest accumulates making your debt more and more expensive. Eventually the debt load will be too great to bear and you may find yourself in trouble,” says Jeff Schwartz, Executive Director, Consolidated Credit Counseling Services of Canada

“If you have any hope at all of gaining financial control of your life and managing your debt, you’ve got to stand up and break the debt cycle,” says Schwartz.

Think longer term

With the stress associated with carrying debt, it’s understandable when you react in the moment to take care of the problem at hand. You’ve got to look at how your actions today and your use of credit to cover costs is impacting your long term future.

Visualize your life without this debt and recognize that the journey to get there will only be achieved if your daily money habits support that goal.

Don’t use debt to pay debt

While making your debt payments on time is crucial to keeping your credit healthy, taking out debt to make other debt payments will ensure that the debt cycle will continue. That’s why you need to avoid using debt for this purpose and that includes payday loans.

It’s time to find other ways to pay your debts. Set a budget that boosts your cash flow and limits your expenses so you’ve got cash to cover your costs.

Plan your spending in detail

When you are setting out your budget, make sure you’ve laid out a framework for spending in great detail. If money has been so tight that you’ve been in the clutches of a debt cycle, then you need to know where each dollar is going.

Get professional help

Depending on your debt load and the state of your finances, it can be helpful to get support from a financial professional to understand what your debt options are. It’s also a good idea to get professional guidance on how to organize your life (i.e. how to live with a budget) to look at how you can sustain staying free from the debt cycle moving forward.

Spend less than you make

How do you end up with debt in the first place? There can be different reasons as to why you accumulate debt, but they all have something fundamental in common: you are spending more than you make. Commit to always spending within your means and you should be able to avoid accumulating more debt.

This may mean learning to be patient and walking away from purchases when you don’t have the cash on hand or when it isn’t earmarked in your budget.

Make sure that you have savings

It is absolutely essential that you have emergency savings on hand to cover unexpected costs. If you don’t, you run the risk of racking debt up again to cover expenses, undoing the hard work that you’ve done to break the debt cycle.

Are you trapped in a debt cycle and are wondering how you can get out? We can help. Call one of our trained credit counsellors at or get started with our free online debt analysis.

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